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Science on the ropes

Successive budget cuts have eroded Brazil’s capacity to fund research

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The federal government budget for 2021, approved in April after a delay of nearly five months, has imposed harsh spending cuts for research funding agencies in Brazil. Out of the R$10.8 billion earmarked for the Brazilian Ministry of Science, Technology, and Innovation (MCTI), approximately R$5.1 billion has been diverted for use in reducing the public deficit. Another R$1.2 billion has been designated as a “supplementary budget allocation”, which can be disbursed with approval from Congress if tax revenues improve. Excluding mandatory overhead expenses, such as payroll, the MCTI will have a budget of only R$1.8 billion, or the equivalent of just 16% of its budget in 2013 (see graph on page 39).

The budget freeze will exacerbate the already troubled situation of the Brazilian National Council for Scientific and Technological Development (CNPq), the federal government’s oldest and largest research-funding agency (see article on page 43). The agency will have R$1.15 billion in available funding this year, 12% less than in 2020, with the budget approved in April including an additional spending cut of R$696 million. In May, however, the Ministry of Finance published a resolution releasing 88% of this amount as a supplementary budget allocation.

To remain within its shrunken budget, the agency has decided to continue to pay for previously awarded grants to the detriment of paying for research projects, its original mandate. “We’re struggling to make up for this loss and we’ve decided to preserve research grants as we’ve done in previous years. Funding to invest in projects has dwindled in 2021 to around R$23 million, which isn’t nearly enough to go around,” explains CNPq Chairman Evaldo Vilela.

Universal calls for project proposals, through which CNPq invests in projects across different fields and in institutions throughout Brazil, were suspended last year and will remain so in 2021. The agency did, however, launch a call for projects related to COVID-19 in 2020, attracting thousands of proposals (see Pesquisa FAPESP issue nº 293), of which ninety were selected. In a statement, CNPq said they have all been awarded funding and are currently in progress. Hernan Chaimovich, a retired chemistry professor at the University of São Paulo (USP), who chaired CNPq from 2015 to 2016, summarizes the situation: “CNPq has become a miniature CAPES, spending the little money it has on grants only,” he says, referring to the Brazilian Federal Agency for Support and Evaluation of Graduate Education (CAPES), a Ministry of Education (MEC) agency that evaluates graduate programs and provides grants primarily for master’s and doctoral fellowships.

News of the cuts was received with indignation by the scientific community, which was expecting funds to be released in 2021 from the National Fund for Scientific and Technological Development (FNDCT). The federal government’s flagship research-funding program, FNDCT is funded by tax revenues from industries such as oil, electric utilities, healthcare, and biotechnology, which are funneled into Sectoral Science and Technology Funds. In its newly approved budget for 2021, the Federal Government maintained its freeze on a significant part of the FNDCT fund, at variance with a law passed by Congress in 2020 that barred further freezes.

The president later vetoed the law, but the veto was overturned in Congress in early 2021 (see the article “Futuro incerto” in the online edition of Pesquisa FAPESP). The Federal Government has dodged the restrictions imposed by Congress by delaying enactment of the law to 2022, and approving the budget first. Only R$534 million of the FNDCT’s nearly R$5.6 billion fund in 2021 has been made available for investment. The remainder, slightly more than R$5 billion—or more than 90% of the fund—remains frozen. The economic minister has promised to release these funds but this will depend on a new law being passed, which could prevent further funding from being committed within the year. “Our efforts are currently focused on releasing additional cash from the Fund,” says Vilela. The Brazilian Funding Authority for Studies and Projects (FINEP), which manages and receives a percentage of the FNDCT fund as an administration fee, has virtually run out of cash to invest in industry grants, one of the main instruments for funding business innovation in Brazil.

The situation at CAPES has improved slightly since the federal budget was approved in April. Under a resolution passed by the Ministry of Finance, part of its budget has been reinstated in the form of roughly R$1 billion in supplementary allocations, increasing its aggregate 2021 budget to roughly R$3 billion. The Brazilian Agricultural Research Corporation (EMBRAPA), linked to the Ministry of Agriculture, has also had its budget for 2021 partly reinstated, although it remains 36% less than what it was in 2020.

More than 90% of the FNDCT fund has been frozen and repurposed by the Federal Government to repay public debt

The spending cuts in April have further exacerbated a science, technology, and innovation (ST&I) funding crisis that began in 2015. Some universities are now running out of cash for routine activities, grants, and research projects. At the Federal University of ABC (UFABC), affirmative-action CAPES fellowships for graduate programs have been stagnated in the last four years. The university had 283 fellowships in 2017, a figure that fell to 265 in 2019, before increasing to 295 in 2020. “During this period, we created seven new graduate programs,” says Charles Morphy, associate dean for graduate student affairs at the university. “The fellowships we have today are not enough to meet current demand.”

The situation was made worse in March 2020 by a CAPES resolution that changed the criteria for awarding graduate fellowships. “Under the new resolution,” he explains, “fellowships granted through affirmative-action programs will be discontinued once students complete their courses and, as far as we know, no further fellowships will be granted.” UFABC has taken several steps to increase its offering of internal fellowships, paid out of its own funds, for scientific initiation, master’s, and doctoral students—it had 174 self-funded fellowships in 2020, compared to 120 in 2017. Morphy notes, however, that even these fellowships are now threatened, as the MEC’s 18% spending cut will be cascaded down to federal universities.

Graduate fellowships at the Federal University of Rio Grande do Sul (UFRGS) have also been reduced from 3,109 in 2019 to 2,891 in 2021. The situation is especially critical for postdoctoral fellowships, which provide an opportunity for promising scientists to collaborate on a temporary basis with active research groups. From 580 in 2018, postdoctoral fellowships are down to 123 in 2021. “These professionals are essential for research in Brazil. They manage laboratories, write papers, and co-supervise undergraduate and graduate students,” says José Antonio Poli de Figueiredo, associate dean for research at UFRGS.

Fellowships at state universities in São Paulo have been similarly affected. USP said in a statement that it has yet to estimate the impacts from the recent budget cuts, but expects a reduction in funding for laboratories and researchers this year, and fewer enrollments in graduate programs due to the limited availability of fellowships. “These cuts create instability in the system and erode the confidence of young researchers, discouraging them from pursuing academic careers,” says Sylvio Canuto, associate dean for research at USP. The outlook for the University of Campinas (UNICAMP) is similarly bleak. “We still don’t have a complete picture of the impacts from the recent spending cuts on graduate programs at UNICAMP,” says Rachel Meneguello, the university’s associate dean for graduate student affairs. “In recent years we have lost an average of 15% of our total master’s and doctoral fellowships from CAPES and CNPq.”

On the positive side, Brazil’s ST&I system has shown a high level of resilience to the loss of funding. For Evaldo Vilela of CNPq, this reflects investments in the last 20 years to train scientists and build research infrastructure in Brazil. “We now have a mature system with high-caliber researchers who have continued to run their laboratories at public universities and are making up for the temporary budget cuts by obtaining funding from international or private sources where possible,” he explains. “Many of them are members of international research networks that have provided assistance when their equipment malfunctions or they need to run an experiment.”

Despite the spending cuts in recent years, Brazilian researchers have succeeded in maintaining reasonably high research output. According to the SCImago Journal & Country Rank portal, Brazilian scientists published 80,400 scientific papers in 2019 compared with 78,000 the previous year, with Brazil ranking 15th globally for research output. The number of Brazilians among the most cited researchers in the world also increased in 2020 (see Pesquisa FAPESP issue nº 299).

Data from the most recent CNPq Census shows that the number of research groups in the country expanded by 149% between 2002 and 2016. The number of PhDs in those groups rose by 278% and the number of researchers by 251% over the same period. “Initiatives such as the Restructuring and Expansion of Federal Universities [REUNI] Program, for all of their flaws, have successfully extended access to higher education and graduate education to thousands of people,” says social scientist Abílio Baeta Neves, who holds the Paschoal Senise Chairship at USP’s Office of the Associate Dean for Graduate Education, and has formerly served as chairman of CAPES. “Many have studied abroad and then returned to become researchers at federal universities throughout Brazil.”

And while Brazil is clearly still reaping the latent benefits from investments over the last two decades—a further illustration that ST&I funding is a long-term endeavor that requires stability—the limits of what the country’s current contingent of researchers can produce still remains an open question. Baeta Neves believes the strategy of funding research grants but not research projects will be short-lived. “Despite the budget cuts, the number of research grants offered by federal agencies has remained substantial. But without new research projects, grant beneficiaries will soon run out of projects to work on.”

Curtailed federal investment is also likely to increase demand for funding from State Research Funding Agencies (FAPs). This is already the case with graduate fellowships. At UFRGS, while the number of CAPES and CNPq fellowships has declined in the last three years, fellowships awarded by the state funding agency in Rio Grande do Sul have more than doubled. Meanwhile, at UFABC, amid the reduction in federal research grants, the contingent of FAPESP fellowships awarded to graduate students jumped from 38 in 2017 to 74 in 2019. “FAPs are helping to soften the blow, but their aggregate budget has also shrunk by around 8% this year, says Odir Dellagostin, chairman of the National Council of State Research Funding Agencies (CONFAP). Of the R$2.5 billion in FAP funds disbursed in 2020, R$1.4 billion went to research grants. “Brazil’s research projects are now being funded more by state agencies.” But FAPs have also been affected by federal spending cuts, he notes. “Many programs using a combination of federal and state funding have been discontinued in several states.”

Although Brazil has succeeded in building robust research infrastructure in the last decades, with relatively well-equipped laboratories, the funding shortfalls in recent years have undermined the country’s capacity to modernize its infrastructure. Funding from the Infrastructure Fund (CT-Infra)—one of the Sectoral Science and Technology Funds created to support the modernization and expansion of Brazil’s research capabilities—fell from R$213 million in 2016 to just R$155 million in 2018. After rising in 2019 to slightly over R$188 million, available funding was slashed to R$27 million in 2020. The Federal University of Rio de Janeiro (UFRJ) provides a case in point of the scale of the impacts. “In 2013 we received R$12.8 million from CT-Infra to upgrade our research infrastructure. In 2018 we got only R$4.3 million,” says Denise Freire, the university’s associate dean for graduate education and research. Luiz Martins de Melo, of the UFRJ Institute of Economics, notes that Brazilian research institutes need access to sophisticated equipment if they are to remain competitive. “The global scientific community is experiencing a technological revolution and now relies on next-generation research equipment with high data processing capacity and the ability to connect to artificial intelligence systems,” he says.

There has been a measurable impact on oil-industry research. Researchers at the Institute for Applied Economic Research (IPEA) interviewed the heads of 280 laboratories receiving funding under the research and development (R&D) clauses of oilfield concession contracts awarded by the National Petroleum Agency (ANP). These clauses are designed to boost research and technology adoption in the industry my requiring companies with large oilfield concessions to invest 1% of their gross revenue in local R&D. “Based on their responses, we found that their most recent investments in infrastructure had been more than five years ago, suggesting oil industry laboratories may be becoming obsolete,” says economist Fernanda de Negri, head of IPEA’s Center for Research on Science, Technology, and Society and one of the authors of the report. “It is likely that this is also the case in other industries.”

In response to the funding shortfall for research projects, many universities are encouraging scientists to seek international funding and collaborations with industry. This, however, is unlikely to fully offset the funding cuts for ST&I. “Companies looking to collaborate with universities on R&D projects typically depend, or have depended in the past, on public programs supporting R&D,” says Melo. “The problem is that few corporations have robust R&D capabilities and the programs we have to support them have been weakened by the recent budget curtailment.”

Of the R$2.5 billion in FAP funds disbursed in 2020, R$1.4 billion went to research grants

One of the most severely affected mechanisms is the industry grants program managed by FINEP. This program helps Brazilian firms to innovate and become more competitive by providing nonrepayable funding for R&D, as a way for the government to share the costs and risks of innovation with them. “This is one of Brazil’s most advanced innovation support programs. Funding is provided directly to Brazilian firms, and they can use it to engage public universities and institutes for research to achieve their business goals,” says Luis Fernandes, an economist and political scientist at PUC-RJ’s Institute of International Relations, who served as chairman of FINEP from 2007 to 2011. “This has been among the policies used by most countries that are now at the forefront of global innovation.”

Data from the last five years, however, shows that FINEP funding for Brazilian firms has remained flat and at very low levels (see table on page 39). “This is primarily due to the budget freeze at FNDCT, the source of funding for the FINEP program,” explains Fernandes. “Large corporates have cut down on R&D investments in Brazil because of the uncertain political and economic environment, while small and medium-sized firms have suffered from a lack of both demand and capacity for investment,” says Melo. According to the Brazilian Institute of Geography and Statistics’ most recent Innovation Survey (PINTEC-IBGE), the percentage of companies engaged in some form of product or process innovation in Brazil dropped from 36% in 2014 to 33.6% in 2017. “Meanwhile, the proportion of firms receiving some form of government incentives shrank from 39.9% to 26.2% over the same period,” highlights Gianna Sagazio, innovation director at the National Confederation of Industry (CNI) and head of the Mobilization for Business Innovation (MEI). “Brazil now ranks 62nd out of 131 countries on the Global Innovation Index.”

For Gustavo Simões, co-founder and CEO of nanotechnology startup Nanox in São Carlos, southeastern Brazil, most companies—and especially small and medium-sized firms—cannot be reasonably expected to bear innovation risks on their own. “Everywhere in the world, these risks are shared with the government,” he says. De Negri concurs that it would be naïve to expect companies or venture capital firms to invest in the early and more risky stages of developing a new technology, which involve a high level of risk with uncertain returns.

The percentage of companies engaged in product or process innovation dropped from 36% in 2014 to 33.6% in 2017

Discussions about public investment in ST&I in Brazil have typically revolved around the government’s financial constraints, but some specialists believe they should instead focus on developing a broader ST&I policy, with priorities given to specific research areas. “Brazil has always invested very little in strategic projects to mobilize its science infrastructure. Even when funding was abundant, investments were highly fragmented,” says De Negri. He notes, for example, that average FNDCT grant funding for projects in the 2000s ranged from R$100,000 to R$300,000, “far less than what would be needed for frontier research projects.”

For Baeta Neves, of the Paschoal Senise Chairship at USP, it is important that Brazil reorganize its research funding system, and re-articulate the identity and mandates of its component institutions. He believes, for example, that the CNPq’s budget should be reformulated to focus only on research projects, with researchers having the option to invest part of the funds to train human resources. “CAPES, in turn, should deepen its institutional relationships with public universities and education and research institutes, helping to formulate strategic policies on graduate programs and mechanisms for assessing program performance,” he says. “It’s no longer about building or expanding Brazil’s graduate education system, but about improving and funding it to achieve excellence.”